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Gold ETPs gain following weakening dollar

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In its weekly note on ETF flows, ETF Securities comments that mixed economic data and minutes from the Federal Reserve’s December meeting weighed on the US dollar, prompting USD69 million of inflows into precious metals.

Last week also saw investors reducing exposure to ETPs tracking long EUR/USD positions by USD95.7 million, while energy prices ticked down due to a massive increase of US oil inventory and milder temperatures in the US.

The gold price rose 1.4 per cent on the week after the US dollar weakened following a somewhat dovish Fed minutes. Gold ETPs saw USD40.5 million of inflows last week. The minutes of the FOMC December meeting revealed that the Fed is optimistic about growth prospects for the US economy, giving more scope for rising interest rates, ETF Securities writes.

“However, the FOMC continues to see risks to this outlook, notably regarding fiscal policy and the negative consequences of a stronger dollar. Overall, market participants revised rate hike expectations downward, suggesting the next rate hike would take place in June. The weaker dollar coupled with stronger US and Chinese manufacturing data also boosted platinum and palladium prices, which have gained 5.7 per cent and 10.2 per cent respectively last week.”
The US employment report showed wage growth rising 0.4 per cent over December – the strongest since 2009, despite the disappointing 156k job gains on the month, ETF Securities says.

“The mixed December US jobs report and Fed minutes halted the US dollar rise that started in November, prompting some investors to pull back their bullish bets. Short USD long EUR ETPs saw USD95.7 million outflows last week.”

Meanwhile in energy, crude oil ETPs experienced a USD17.9 million withdrawal after the US Department of Energy reported a massive rise of distillate inventories. “The oil price moved slightly upward on the news that Saudi Arabia cut its crude oil production by at least 486k barrels a day since October. However, the oil price pared gains after the US inventory data showed an extra 18mn barrels to gasoline and diesel stockpiles last week. In addition, US natural gas and carbon prices both collapsed by 10.8 per cent and 23 per cent, respectively last week. The price declines were triggered by predictions of milder temperatures in the US, and a drop of EU carbon allowances in the EU Emissions Trading System (ETS),” ETF Securities writes.
 

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